UN Unilever NV

By Saabira Chaudhuri 

LONDON-- Unilever PLC disappointed investors on Thursday, warning of a difficult start to the year while reporting lower sales for 2016, driven by slowdowns in refreshments and home care.

Unilever, whose brands include Hellmann's mayonnaise, Dove soap and Ben & Jerry's ice cream, reported a 5.5% rise in net profit from a year earlier to EUR5.5 billion ($5.91 billion) in 2016. But revenue fell 1% to EUR52.7 billion, hit by a negative currency impact of 5.1%.

The company has turned to driving sales growth through price increases in recent quarters, a strategy generally seen as less healthy by investors than boosting volumes since it depends on trading customers up to more expensive products rather than attracting new ones.

Unilever's shares were down 4.4% in Thursday morning trading in London.

Liberum analyst Robert Waldschmidt offered a bearish view on the company, saying Unilever will have to move to shore up volumes by cutting prices in emerging markets despite higher raw-materials costs.

The Anglo-Dutch company, which makes most of its sales from emerging markets, blamed Brazil's economic crisis and the recent demonetization in India for hindering its performance. It logged growth of 6.5% in emerging markets. But it also turned in a lackluster performance in developed markets, where it reported flat underlying sales growth.

Bernstein analysts described the performance by Unilever's personal-care, refreshments and home-care arms as "quite disappointing" in the fourth quarter, noting that only foods--typically a slow-growing business for the consumer goods giant--beat expectations.

For 2016, the personal-care arm reported 4.2% underlying sales growth, roughly flat with the 4.1% reported for 2015. In home care, Unilever reported 4.9% growth, compared with 5.9% last year. In refreshments--made up of tea and ice cream--Unilever reported underlying growth of 3.5%, compared with 5.4% last year. The food arm logged growth of 2.1%, up from 1.5% in 2015.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

January 26, 2017 04:33 ET (09:33 GMT)

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